Ross Garnaut advises using about $6 billion of the $11.5 billion revenue raised from pricing carbon for tax reform. He calls for reducing tax rates and the social security withdrawal tapers for low income earners thereby promoting productivity and encouraging more entrants into the workforce. He wants generous tax cuts for low and middle-income earners and compensation for those on fixed income. He is urging the government to concentrate on compensation.
He advises the initial prices needs to be abut $25 a tonne rising at 4% in real terms per annum to meet Australia’s bipartisan target of cutting emissions by 5% by 2020 from 2000 levels.
He describes it as a choice between the superiority of market-based pricing and the dinosaur of state regulation that he brands ‘the Yugoslav variant of central planning’.
His main focus is getting this system right for all time so it doesn’t become a honey-pot for rent seekers. Let’s get it right let’s get the principles right and stop assistance becoming a permanent cancer in the body politic.
Garnaut utterly opposes compensating industry for a carbon price. He believes in industry compensation only to the extent that because other nations have no carbon price this puts Australian industry at a cost disadvantage. He says assistance must be transitional. He rejects any industry support arising from profit damage or asset losses.
He proposes an independent regulator with the type of constitutional protection of the Reserve Bank to advise when global carbon prices reach a level that eliminiates the economic justification for assistance. This regulator would rely upon the analysis from the Productivity Commission or a similar body. All reports would be public.
He wants transport inside the scheme.
He wants to use 15% of the revenue to purchase low-cost farm carbon abatement spending $2.5billion.